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China and Costa Rica move toward free trade agreement

China wants ties in the region, Costa Rica wants Chinese goods. But not everyone's pleased.

In commerce, however, the affair is in full bloom. China is this country's second largest trading partner after the United States. Exports to China — the bulk of which are high-tech products like Intel's computer microprocessors — soared from $12.7 million in 2000 to $848.7 million in 2007, an average growth rate of 90 percent a year.

The Ticos, as Costa Ricans call themselves, also have a voracious appetite for a wide variety of Chinese goods, ranging from toys and electronics to shoes and even beans. Imports from China have also climbed rapidly, from $78.4 million to $763.2 million, during that same seven-year span. 

For many businesses in Costa Rica, it's the imports they're worried about. Vilarrasa said Chinese companies sell plywood in Costa Rica for as much as 20 percent cheaper than Plywood Costarricense. 

Apart from threatening their cost structure, Tico business leaders claim Costa Rica is taking a big risk with a country that hasn't earned its trust yet. 

"With the United States we just entered a free-trade agreement," Montero said, referring to the Central American Free-Trade Agreement with the United States (CAFTA), which Costa Rica officially joined in January of this year. "But with the United States we have 200 years of relations — of all kinds, political and commercial. With China we didn't have a [diplomatic] relationship until not even three years ago."

Montero said businesses fear that questionable standards in China on environmental protection and labor rights put Costa Rica, which prides itself on such regulations, at a disadvantage.

"China is a communist dictatorship, while we have an economic system based on democracy. On an economic level, that creates enormous differences in the cost structures of products that will be in competition," the food and beverage sector leader said.

Costa Rica has brokered six FTAs — with Canada, Mexico, Chile, the Caribbean Community, Panama and CAFTA. These last two came about under the administration of President Oscar Arias. The leader is seeking to finish his presidency with at least three more such deals. In addition to China, Tico negotiators are in talks with Singapore and the European Union. 

But despite appearances, the Ticos aren't necessarily innate free-traders. CAFTA polarized the country, and only narrowly won a public referendum in October 2007. Even then, it still took more than two years for legislators to debate all the liberalizing reforms needed to join the club with the rest of Central America, the Dominican Republic and United States.